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Central bank intervened to halt NT dollar: dealers

The central bank dumped an estimated US$492 million in New Taiwan dollars to curtail strong gains by the local currency yesterday, narrowing the gain from NT$0.191 to NT$0.026 in two minutes before the close, dealers said.

Strong inward remittances by foreign investors and greenback sell orders from exporters propelled the NT dollar to a 30-month high against the US currency.

"This is the way our central bank tells market participants to behave," one dealer said. "But the central bank should know that the tide is changing -- money will keep coming in as investors snap up stocks, because the Taiwanese market is the safest bet when other Asian markets are falling along with the US."

Without confirming or denying that it had intervened to pare the currency's advance, Duann Jin-sheng (段金生), director of the central bank's foreign exchange bureau, yesterday reiterated the monetary authority's stance that the value of the NT dollar should be determined by market supply and demand.

However, he said, "the central bank will take action to maintain market order, should the exchange rate fail to reflect the economic fundamentals."

He said the central bank would "keep a watchful eye out" for money being wired in with the purpose of reaping profits from foreign exchange speculation.

The New Taiwan dollar closed at NT$31.495 against the greenback yesterday, from an intraday high of NT$31.3. Turnover totaled US$1.512 billion, down moderately from US$1.884 billion on Thursday.

A senior bank dealer said a wave of speculation was fueled by central bank Governor Perng Fai-nan's (彭淮南) apparent approval of a comment made by the Council of Economic Planning and Development (CEPD) that the NT dollar's appreciation was helpful in curbing inflation.

The escalating prices of imported commodities increased inflationary pressure on the local economy, pushing the consumer price index up by 4.5 percent year-on-year in the fourth quarter last year. The CEPD predicts the inflation rate will hover above 2 percent in the first half of this year, but edge down gradually in the second half.

"The NT dollar is appreciating because the trend of a weak US dollar has been confirmed. This won't change, even if the governor issues a statement to deny that he has said anything positive about the CEPD presentation," the senior dealer said.

Bank dealers said the NT dollar is likely to challenge NT$31.3 again on Monday. The currency has appreciated NT$0.936 against the greenback since the beginning of the year, and NT$0.251 over the past four trading days.

The TAIEX was up 22.78 points yesterday to close at 8,108.71.

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